Cash, Credit, or Digital: What Payment Options Are Best for Your Small Business?

Small business owners must often wear many hats and consider each part of their business, including how customers make payments. Deciding how payments are accepted will make a difference in whether your sales process runs smoothly or not. It may also affect your bottom line in the long run. 

Keep reading to get more informed about the various small business payment options available today. 

Option 1: Cash

One of the simplest payment methods is cash. There are many advantages to using and accepting cash. Cash is easy to accept and liquid. Another advantage of cash is it can be a leveraging tool. It also reduces your overhead costs, as you don’t have to pay any processing fees charged by payment platforms.

There are some disadvantages to using cash as well. Cash is difficult to store securely. You also have a higher risk of mismanaged money or theft. There is also a risk of lost business from customers who don’t carry cash. 

On top of that, some banks see large cash deposits as an indication that you are at risk of illegal activity. And banks have to report deposits greater than $10,000, but it is illegal to intentionally make several smaller deposits to avoid this Currency Transaction Report. 

If you prefer to use cash as a payment method, here are a few tips for keeping cash payments organized: 

Keep Your Cash Secure and Count it Regularly

If you decide to include cash in your small business payment options, be sure to keep it in a secure location and regularly the amount you’ve accumulated. This significantly reduces the risk of mismanagement or theft.

Train Employees to Recognize Counterfeit Bills and Verify Authenticity

Give all your employees training on counterfeit bills. Make sure they understand how to spot counterfeits or verify the authenticity of bills and give them the tools they need to do so. For example, you can invest in verification pens or verification machines. 

Develop a Cash Management Policy and Consider Using a Cash Management System or Service

It is absolutely crucial to have a cash management policy. This will ensure that everyone on your team follows the previous two tips. You may even want to use a cash management service or system to help you. Many payment platforms also include cash management features that automate handling and reconciliation. Such features greatly reduce the risk of human error in these financial processes.

Option 2: Credit Cards

Many customers look for payment methods that involve their credit cards. In fact, 75% of customers prefer using a credit or debit card for transactions. In other words, accepting credit cards expands your reach to more customers.

It also minimizes the risk that someone will reach the checkout and then abandon their cart because you don’t offer their preferred forms of payment. On top of that, credit cards encourage larger transactions, as they allow for financing. 

Of course, you will need hardware or software to accept payments from credit cards. That being said, the software can provide you with valuable information, such as the ability to automatically track amounts and transaction dates, along with customer information. 

The main caveat to keep in mind is that credit cards do require you to pay processing and transaction fees. You will have to compare processing services to choose the best combination of fee and reputation. 

The other caveat is the risk of a chargeback, which is when customers dispute the charge. Too many chargebacks may affect your ability to find a payment processor. 

It is also worth noting that while most systems accept Visa and MasterCard, you may have to pay extra to accept American Express or other types of credit cards. 

Once you decide to accept credit card payments, you will have your choice of several credit card processing options. Keep in mind that any service providers that accept credit cards should also accept debit card payments, as the necessary equipment is the same. 

You can choose different types of credit card processing options, including the following:

Point-of-Sale Terminals

POS terminals are the traditional credit card processing option. These are standalone systems, either countertop ones or handheld devices, which include a credit card reader and handle your various transactions. 

Given the popularity of contactless payments, you likely want to opt for a terminal that uses RFID or NFC technology to accept tap-to-pay. This makes payment more convenient for customers and speeds up transactions, but it also poses a security risk due to skimming devices, including technology on mobile devices. 

Mobile Payments

Newer POS alternatives turn your smartphone or tablet into a mobile POS system via a mobile app. You just attach a credit card reader and download an app. This reduces hardware costs and adds portability to your payment system. 

Online Payments

Online payment methods require either an online terminal from your payment platforms or using a third-party service like Square or PayPal. They are easy to use and let customers input their credit card information online. 

As mentioned, it is smart to include credit cards in your list of small business payment options. Make sure to follow these tips to reduce challenges as you integrate online transactions. 

Choose a Reputable Payment Processor and Follow Security Best Practices

The most important part of accepting credit cards is choosing the right payment processing software. It needs to be secure and reputable. Always choose a payment system with PCI compliance, as this ensures your customers’ information is safe. PCI-compliant payment processing software and companies will handle the card processing as well as store the transaction history and accounts. 

Optimize Your Payment Process for a Better Customer Experience

As with any other aspect of the customer journey, regularly evaluate and optimize your payment process to ensure your customers have a good experience. Ask for feedback or look at data to confirm your online payment methods are intuitive to use. 

Monitor and Analyze Your Payment Data to Identify Trends and Opportunities for Improvement

Conveniently, any payment processing platform will give you at least basic data, if not advanced analytics, regarding your sales. Use this data to look for trends and opportunities for improvement. For example, you can see what time of day has the most transactions, what types of cards are the most popular, or what products are most likely to be purchased on credit cards. 

Option 3: Digital Payment Services

There are several digital payment services your small business can choose to utilize. These include but are not limited to the following:

PayPal

Founded in the late 1990s, PayPal is easily one of the best-known digital payment services today. Setting up an account on the platform takes minutes and you can start using your account right away. There are even PayPal point-of-sale systems. 

Customers appreciate the platform’s ability to keep their payment information private from companies. They can use PayPal to pay with a credit or debit card or by bank transfer. 

Of course, PayPal comes with fees, so be sure to compare these to fees from other methods, such as credit card processing. 

Venmo

Venmo is most widely known for peer-to-peer payments, but the platform also offers business options. As a bonus, it adds a social element, letting users see, comment on, and like other people’s purchases. 

Venmo can be very convenient for mobile vendors who want to accept cashless payments. Customers just scan your company’s QR code and quickly send money. You can also add Venmo to your website or app. 

Apple Pay

This is a digital wallet that stores users’ credit and debit card information. Paying with the wallet automatically charges the designated card in the user’s wallet or the linked bank account. Apple Pay is especially popular among younger consumers. 

Google Pay

Google Pay works similarly to Apple Pay, without the restriction to Apple devices. As such, it can be used by anyone regardless of the smartphone they use. 

No matter which digital payment service you choose, you will get to take advantage of a few advantages but should be aware of a handful of disadvantages. 

Customers appreciate the convenience of not having to pull out a credit card to buy something, as the information is already in the digital payment service. Some even allow for contactless technology, especially smartphone apps like Google Pay and Apple Pay. 

From your standpoint, it becomes much easier to accept payments with a digital service, as you don’t need a credit card reader for desktops or mobile devices. Additionally, these services are typically integrated with payment processing, so you can use the same service for both accepting and processing payments. 

Just keep in mind that each of these platforms will have a fee. There is also a higher security risk with any digital payment method, so it is extra important to choose a strong password and take other security measures. 

The following tips combine best practices for security as well as general advice to take full advantage of your digital payment services. 

Choose a Reputable Digital Payment Service and Follow the Setup Instructions Carefully

You will be trusting your digital payment service with your customers’ private financial data as well as that of your company. So, choose a reputable company that uses advanced security measures. Also, pay attention to the company’s reputation for fund delivery and how frequently it holds funds. 

Then, follow the setup instructions carefully. Making a mistake during setup can delay your ability to use the service or even cause payments to be misdirected. 

Use Strong Passwords and Enable Two-Factor Authentication to Protect Your Account and Customer Information

Given your business’s financial dependence on your digital payment account, make sure to always use strong passwords and two-factor authentication. While that is good practice for any account, it is especially important for financial accounts, especially business ones and those that handle the volume of funds that yours will. 

Monitor Your Transactions and Customer Feedback to Improve Your Payment Process and Customer Experience

As with any other payment method, monitor your transactions and get customer feedback. This will let you improve the customer experience as well as your payment process. Use feedback and data to make any necessary changes that will improve customer loyalty or your company’s efficiency. 

Option 4: Alternative Payment Methods

There are several different methods a small business can use when taking payments without setting up credit card processing in a traditional manner. For instance, you can accept money orders, checks, and online payments. 

ACH payments made via the Automated Clearing House are a very popular alternative payment method. The most common example of this is a direct deposit, but you can also accept it for customer payments. It adds convenience for both you and the customer but be aware of fees. 

This method can be especially helpful for subscriptions or recurring transactions. As a bonus, ACH information never expires, unlike credit and debit cards. However, ACH payments come with a risk of overdraft fees or overpayment. 

Wire transfers or electric fund transfers (EFTs) send funds between banks. Examples include SWIFT and Western Union. The fees for this are incredibly high and transfers can take a while or even be potentially lost. Most small businesses will want to skip this payment method. 

Meanwhile, physical checks give you the advantage of a paper trail. However, most companies no longer accept checks because of the risk of them bouncing and the time they take to process. 

Payment Solutions for Your Small Business 

The following are some of the most common payment options among small businesses. 

Square

Square was founded in 2009 and is one of the most popular payment platforms. It began as a card reader option and has greatly expanded over the years. Now, it has one of the biggest payment systems and selections of hardware to use. You can rely on Square to take payments in person, remotely, or online. By using Square, you’ll also be able to accept payments on the go. 

There is no monthly cost for using Square, but there are fees for every transaction. Overall, Square is known for its competitive transaction fees and reliable service. 

PayPal 

As mentioned, PayPal is among the most widely used payment platforms. It has low processing fees, account integration, customer support, and fraud protection. There is a version with fairly competitive fees as well as PayPal Payments Pro for small businesses that want additional features. That version, for example, lets you process payments right on your website. 

PayPal also works well for international transactions. This makes it appealing to any company with international clients or plans to expand internationally. 

Shopify

Shopify Payments comes from one of the best-known e-commerce platforms, Shopify, which is commonly used for building and designing online stores. The payment system has lower transaction fees than many competitors and integrates seamlessly with your Shopify store. It also has great account integrations and fraud protection. You can also take advantage of discounted in-person transaction rates. 

Shopify Payments is worth considering if you already use Shopify’s e-commerce platform or plan to do so. Otherwise, you may want to consider a different solution. 

Clover

Clover is yet another incredibly popular option for payment processing. There are various Clover devices, including the Clover Flex, a handheld all-in-one POS system. It also lets you track sales and more. You can use it to accept chip, swipe, tap, and NFC payments. To keep customer data and payments secure, the system uses end-to-end encryption as well as data tokenization. 

Keep in mind that you will usually have to pay for the hardware and pay a monthly fee in addition to the transaction fee. But the transaction fees are slightly lower than some of the other options to make up for the monthly fee. 

Clover is a strong option for small businesses in search of a physical POS device in addition to their payment system.

Podium 

We saved our favorite for last: Podium. Podium helps small businesses like yours get paid faster. With Podium Payments, you can:

• Accept every payment method
• Offer financing options and subscriptions
• Get paid where you already communicate—via text
• Keep payments safe and secure

Convenience is the key to the modern customer’s heart, and Podium makes payment processing convenient for everyone involved.

Revolutionize Your Small Business with Podium

Podium is a customer communication platform that allows small businesses to manage customer interactions, improve customer service, collect payments, and more. It does so by putting all of your conversations in a single place and offering a variety of communication methods, such as texting and Webchat. It also streamlines the process of gaining reviews and valuable customer feedback. 

Consider Podium for your payment and customer communication needs.

Ready to get started? Start a free trial today. It’s risk-free, no strings attached.